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Understanding China's Economic Reform (PITFALLS (Continuing State…
Understanding China's Economic Reform
PERFORMANCE
Large Trade Surpluses
Agricultural Growth + Urbanization
High Forex Reserves
Equity Markets Growth
Largest Trading Partner for Key Countries
SOE Competitiveness
The World's Factory
Private Sector Surge
HDI Improvements
Massive Consumer Market
Poverty Reduction
Digital + E-Commerce Sector Boom
PITFALLS
Potential for Social Unrest
Overcapacity
Wasteful Investment -Ghost towns
Rising Inequality
Environmental degradation
Continuing State Dominance
Equity Markets witness heavy intervention
State-Owned Enterprises GDP contribution remains high
Increasing debt burden
Ageing Population
Deep-seated Corruption
Export-led to Domestic Consumption-driven
Need for Technological Leap as gains from low-end manufacturing fall
Limited Market Access to Foreign Firms & Goods
Discretionary Nature of Policies
High regional disparity in development
PEOPLE & PHILOSOPHY
1980s
1990s
2000s
2010s
Xi Jinping
Yi Gang
Li Keqiang
Liu Kun
Hu Chunhua
Han Zheng
Liu He
He Lifeng
Hu Jintao
Wen Jiabao
Jiang Zemin
Zhu Rongji
Li Peng
Hu Yaobang
Li Peng
Zhao Ziyang
Yang Shangkun
Hua Guofeng
Eight Immortals
Deng Xiaoping
Core Philosophical Thought
Socialism with Chinese Characteristics
Poverty is not socialism. To be rich is glorious.
The Four Modernisations - Agriculture, Industry, Defense and Sci-tech
It doesn't matter if the cat is black or white, so long as it catches the mice.
Cross the river by feeling the stones.
POLICIES
Export Promotion
Focus on light manufacturing
Employment generation; early focus was on labour intensive manufacturing; that is now changing
Growing into factory of the world
Private Sector
Key legal changes in 1987-88 to allow pvt/individual enterprises; such changes continued through 1990s and even till the 2000s
Initial investments were from household savings and baking sector came in much later
Private sector growth went from virtually non-existent to developing through initiative and rent seeking
Pvt Sector today contributes 60% of GDP and 80% of jobs
State Enterprises
Adopting market-oriented approach
Reducing central government influence
Promoting professional management
Shift from iron bowl policy to 'each according to his work'
Currency Controls
High state intervention in currency valuation; limitations on currency convertibility; curbing excessive overseas investment; overseas investment guided by state policy
Equity Markets
In late 1990, the SSE was re-established; today's market cap is around $3.5 trillion; Yet gov't intervention remains high; still not open entirely to foreign investors and tight capital controls exercised - Example 2015 crisis.
Agriculture
Ending communes system to allow household responsibility system
Introduction of Township Village Enterprises
Ensuring plan inputs in fertiliser from SOEs
The dual-track pricing system
Focus on agricultural industrialization
Reduction in onerous agriculture tax to abolishing it and providing subsidies
Shifting to fully private enterprises and private land lease
Foreign Investment
FDI was invited in select cities and industrial zones
Decentralised policy allowed local gov't competition for FDI
Initial focus on manufacturing to now shift in services
From less than $200 million in 1980 to $118 billion in 2016
WTO Membership
China actively pursued and joined the WTO on Dec. 11, 2001
SEZ Policy
Shenzhen was the first SEZ and since multiple SEZs, industrial/tech parks have been established with trading rules eased in these areas